Growth is on the cards!

Whew! The year we all dreaded – 2010 – is now history. Literally. And, while we all feared the onset of this supposedly horrific year, 2010 didn’t turn out quite as badly as expected. How did the individual manufacturers fare? And what will happen in 2011? In typical Transport Manager’s Handbook fashion, CHARLEEN CLARKE asks the captains of industry to reflect on the year that was and take a peek into their crystal balls and predict the year ahead…

The 2010 commercial vehicle market (trucks, buses and vans with a Gross Vehicle Mass of more than 3 500 kg) clocked in at 22 022 units, a year-on-year improvement of 16,3% on 2009. Medium commercial vehicle (MCV) sales grew by 4,34% to 7 557 units; heavy commercial vehicle (HCV) sales rose by 13,11%, to 4 418 units; extra heavy commercial vehicle (EHCV) sales increased by 24,29% to 8 496 units; and bus segment sales rose to 1 551 units retailed – an increase of 7,54%. The light commercial vehicle (LCV) market performed much better than expected too, ending the year with 133 790 sales – 13,2% up on 2009.

Accordian Investments, the distributor of Tata passenger and light commercial vehicles (LCVs), had a reasonably good year in 2010. As Christo Engelbrecht, national marketing manager, notes: “2010 was better than 2009 and we saw stability in our sales. The market sobered to the fact that we had an economic hiccup and sales patterns for 2010 showed conservative growth, which may not be all bad as this growth is more realistic and sustainable. Also we had no new product until November,” he tells FOCUS.

Engelbrecht is upbeat about 2011. “We will be launching exciting new Tata passenger and commercial vehicles. The LCV market will show steady signs of growth as more small businesses flourish. I believe the private and public sector will show signs of growth, which will equate to the purchase of more fleet units this year,” he predicts.

Eugene van der Berg, national sales and key accounts manager at FAW Vehicle Manufacturers, says things were far from easy last year. “While 2010 initially held the promise of substantially increased business – mainly because of a buoyant construction centre fuelled by the FIFA Soccer World Cup (SWC) – in reality we were faced with dealing with a recession worldwide and the subsequent increased stringency of the banks’ loan policies,” he tells FOCUS.

According to Van der Berg, while the year was tough, FAW showed a “satisfactory” growth of 22% over the previous year. In 2011, FAW will be much more aggressive. “We will be more proactive in taking the product to the customer to show them its features and benefits. We will be expanding our dealer network and incentivising the sales team, a task that will be driven by a new product range. The upshot, we believe, will be growth of at least 35% for 2011 for the FAW brand,” he predicts.

Ford Motor Company of Southern Africa (FMCSA) achieved a 10,2% share of the total market in 2010 and, according to Lloyd Marlowe, corporate communication manager, the company aims to do even better in 2011. “We plan to leverage the momentum we built in the second half of 2010 with the launch of several new models and derivatives that compete in high volume growth segments,” he tells FOCUS.

When it comes to 2011, Marlowe believes that the total market will certainly increase. “The forecasted market growth is due to the reduction of the prime rate last year and the expected rate stability this year. We still expect 2011 to be one of debt consolidation for most consumers. Furthermore, debt as a percentage of disposable income is still at 2010’s high levels,” he says.

“The pending introduction of emission tax on double cabs from 1 April will create a possible spike in double cab purchases prior to this date. Our forecasted Naamsa market growth in the LCV segment is 5,2%, and we are predicting 3,2 and 3% growth in the MCV and HCV markets respectively,” he reveals.

General Motors South Africa (GMSA) had an amazing year; it boasted the highest increase in sales volumes for 2010. Furthermore, December marked six months of sustained growth for GMSA with sales up 41% compared to the first six months of the year.

According to Malcolm Gauld, GMSA’s vice-president of sales and marketing, the Chevrolet Corsa utility continued to dominate the half-ton segment of the LCV market. In December GMSA delivered a total of 1 559 of these vehicles, the best monthly performance in 2010 for this model and one that took its unbroken segment leadership to 69 months.

Looking ahead into 2011 Gauld expects to see a less fragile market possibly capable of achieving double digit growth for the year. “The continued strength of the rand and interest rate stability will play an important role in assisting to keep inflation under control to relieve pressure on consumers. Reports from vehicle finance institutions indicate that while the number of applications for finance might not have grown substantially, the quality of the applications has improved in recent months resulting in a higher approval rate,” says Gauld.

Hino’s Casper Kruger notes that the South African commercial vehicle industry started 2010 on a cautious note, with most participants predicting a growth margin of less than 10%. This conservative approach was understandable, he believes, given the extremely difficult trading conditions experienced by manufacturers, importers and dealers in 2009.

As the first half of the year progressed, Kruger says the approach by the local business community to SWC preparations was “admirably calm”, with minimal distortion of the truck market caused by obvious last-minute buying. “There were some predictable short-term increases in the rate of passenger and distribution vehicle deliveries, but the magnitude of these was not sufficient to significantly disturb the natural balance of the market. Then, after the inevitable disruption of four weeks’ intense focus on the SWC, the country got back to business, and it was soon evident that any earlier apprehension regarding a post-SWC market collapse was unfounded. Reported sales volumes grew steadily, in absolute terms, from August to November, and it was notable that the penetration of premium EHCV units was strengthening, suggesting that the financing environment was on the mend.”

This revival in the fortunes of the heaviest vehicle segment was fully reflected in the market breakdown for 2010 when compared to the equivalent situation one year earlier. “The EHCV segment has regained its former market leadership position with a more than 38% share, compared to 34% in 2009. Combined sales of entry-level MCV trucks, vans and buses finished the year with a penetration of 34,3%, down from just more than 38% one year earlier, while the distribution-rich HCV segment maintained its long-running station firmly anchored to the 20% market share line,” says Kruger.

Bus sales, which include the luxury coaches specially imported to support the movement of SWC teams, officials and spectators, surprisingly lost ground in 2010, with a market share of just more than 7%, whereas their 2009 performance had supported a penetration level of 7,5%. “While the global financial picture still remains uncertain, it is now clear that South Africa is generating much of its own economic momentum, based on increasing trade with other developing economies, for whom road haulage is an economic necessity.

“Positives include good demand for export commodities, increased global interest in African commodity resources, interest rates at recent historic lows, a strong rand to support importation of capital equipment, and plans for a considerable level of national infrastructure development. The industry can now look forward to sustained growth in 2011, and prospects for truck sales are likely to remain positive for several years thereafter,” he predicts.

In terms of market trends, Kruger is calling growth of around 4,5% in 2011, which is slightly above the consensus GDP of between 3% and 3,5%. “This equates to a market of 23 000, and we predict growth in all segments. We are ready for the challenges of 2011 and are looking forward to improving our market share in at least two of the three segments,” he concludes.

Danie de Beer, general manager: commercial vehicles at Hyundai Automotive South Africa, points out that Hyundai truck sales more than doubled in 2010 versus 2009. “This can be directly attributed to our increased focus on the two truck models. Because we increased our focus on sales it was obvious that we had to take a hard look at the market and the various offerings,” he tells FOCUS. In addition, Hyundai’s sales were bolstered by the fact that the MCV market started to show signs of recovery.

De Beer is understandably proud of his product range. “With regards to specification, we have always been on par with our competitors. However, with the new Euro2 Mighty HD65 and Mighty HD72 we now boast a higher specification level than some rival manufacturers. We have not only upgraded our engines and improved on power output but we have also improved our warranty, roadside assistance and added ABS and a service plan. We are confident that the market will respond well to these improvements,” he notes.

Along with the rest of the Hyundai team, De Beer is upbeat about prospects for 2011. “We are very optimistic, and our focus on commercial vehicles will intensify even further. We are planning dedicated commercial dealerships in Gauteng, Western Cape, Free State and KwaZulu-Natal. Gauteng will be online first and the rest will follow soon after. Our independent dealers are also on board and are very positive about selling our Mighty HD models,” he tells FOCUS.

Craig Uren, COO of Isuzu Truck SA, was pretty chuffed with the market in 2010. “We expected the market to come in at 21 000 and it was 22 000. General sentiment and market activity ended up being better than initially anticipated. Considering the amount of hype around the SWC that did and didn’t materialise, we can’t say we are unhappy with the result,” he tells FOCUS.

The same can be said of the company’s performance last year. “Our performance in 2010 continued to improve year on year,” comments Uren.

Looking forward, Uren believes that the momentum of the market will continue in 2011, and we can expect “roughly 10% growth year on year”. “The EHCV segment will more than likely be the biggest growth segment. Isuzu Truck plans to continue improving performance within the market in 2011 based on all new product introduced in 2009/2010,” says Uren.

Mark Gavin, national sales support manager at MAN Truck & Bus (SA), says sales for 2010 were in line with expectations. “2010 brought a lot of excitement along with it, with the staging of the SWC, so everyone was optimistic that the markets would improve (although it was difficult to do much worse than 2009). The truck market performed much better than expected. MAN performed well and we retained our number two position in the extra-heavy market, with a share in excess of 11%,” he comments.

Mario Geldenhuys, manager of strategy & planning – Sales Region Africa, concurs: “2010 sales were much better than anticipated in all segments of the commercial vehicle market. After a slow start, the heavy segment gained momentum in the second half of the year on the back of improved economic activity as a result of increased consumer confidence and spending. The extra-heavy segment maintained excellent growth throughout the year mainly due to operators commencing again with their fleet replacement cycles early in the year. The bus market showed resilience in the aftermath of the SWC, recording higher than expected sales in the second half of the year,” he comments.

Geldenhuys also agrees that MAN performed well. “Our truck sales showed strong growth during the year with market share gains in both segments of the market. The newly launched TGS was very well received in the market and recorded excellent sales,” he notes.

Turning to 2011, Geldenhuys believes that the commercial vehicle market will continue its upward trend during 2011. “Growth in the heavy segment is expected to be constant at or even slightly higher than current levels (15% plus) on the back of improved economic activity while the extra-heavy segment is expected to grow at a more modest 10 to 15%. This growth will be as a result of continued fleet replacement and expansion, with business confidence now being more positive for the year ahead. The bus market is expected to decline by about 30% during 2011 from the high volumes achieved during 2010 in support of the SWC,” he reports.

He is upbeat about prospects for the MAN and Volkswagen brands. “We believe that we will grow our market share by entering new competitor fleets with the excellent, recently launched TGS model range, as well as with the improved VW truck and bus model ranges,” he predicts.

Brand Pretorius, CEO of the McCarthy Group, says that the “modest” sales improvement in the commercial vehicle segment could be ascribed to a slowdown in investment in infrastructure projects, corporate earnings remaining under pressure, ongoing company failures, and that the upturn in economic activity only benefited some sectors of the economy.

“Although there are a number of factors in both the international and local economies that will make some industry insiders take a fairly cautious approach to forecasting sales in 2011, I am of the opinion that it is indeed possible to achieve meaningful growth within the total vehicle market this year,” he tells FOCUS.

Factors that will impact positively on the vehicle market this year include the anticipated sustainability of the global and local macro-economic recovery, the growing levels of business and consumer confidence, the ongoing strength of the South African currency, the prime lending rate, and the increasing willingness of financial institutions to grant credit.

Kobus van Zyl, vice-president, commercial vehicles, Mercedes-Benz South Africa, says that the 2010 market was “much better than expected”. “We knew that the bus market would be strong on the back of the SWC, but the performance of the EHCV market was a pleasant surprise. While this is a positive indication of increased economic activity, we believe that the majority of the purchases in this segment were as a result of fleet replacements rather than fleet expansion,” he points out.

“We are very satisfied with our sales performance, especially in the large van market, where we managed to achieve a very good increase in share with the Sprinter. However, the whole division ended 2010 on a positive note – with total sales of 6 185 units in the over 3,5 ton GVM segments. This translated into a market share of 28,1%, an increase of 0,6% over our 2009 performance. We outperformed the market growth with all three of our commercial vehicle brands, namely Mercedes-Benz, Freightliner and Mitsubishi Fuso. We are also delighted by our strong performance in the EHCV segment and the market overall,” says Van Zyl.

MBSA continued its good performance in the EHCV segment, with total sales of 2 718 Mercedes-Benz Actros, Axor, Freightliner and Mitsubishi Fuso trucks, resulting in a market share in the over 16 ton GVM segment of 32%. In the MCV segment, the Mercedes-Benz Sprinter and the popular Mitsubishi Fuso Canter performed well, with sales for 2010 of 2 031 units (an increase of 8% over 2009). Sprinter sales volume grew by 10%, which resulted in the vehicle increasing its share of the large van market by some 5,5%. MBSA’s HCV sales increased by 3,5%.

The Mercedes-Benz Bus & Coach division had an extremely busy period leading up to the successful SWC, and the completion of the first phase of the Gautrain Rapid Rail system, with a significant contribution to the year-end sales of 694 units and a market share of 44,7%.

Van Zyl is forecasting “moderate growth across all commercial vehicle segments, with the exception of buses”. “Our call for the total commercial vehicle market (above 3,5 ton GVM) is around 23 500 units for 2011. We are very confident that MBSA CV will have a good year across all segments and product lines. The recent launch of the new Fuso and Vito/Viano ranges will support increased sales activities, especially in the first half of the year,” he concludes.

Bob Jones, general manager, sales and marketing at Navistar International Trucks Southern Africa, says that 2010 was a good year. “EHCV sales exceeded everyone’s expectations in 2010, as the market showed a sizeable increase on the previous year,” he comments. The year was good for Navistar International too. “I am pleased to report that we increased our market share,” Jones tells FOCUS.

Turning to 2011, Jones expects the EHCV market to grow. “We are expecting in excess of 18% growth in this sector. With new product being added to the International truck range, we anticipate increasing our share of this market,” he comments. Jones also predicts growth in the medium and heavy vehicle sector – “but not to the extent of the EHCV sector”.

Erwin Stolze, marketing manager at Powerstar, says last year is better forgotten. “The economic climate resulted in Powerstar not recording the desired sales volumes. Our sales momentum also slowed during 2010 while the business was being restructured.”

“We expect the commercial vehicle market to grow by between 20 to 25% in 2011. This will be due to credit becoming available, increased mining activity and improved business confidence,” he tells FOCUS. Growth markets in 2011, according to Stolze, will include government, waste, mining and exports. Powerstar intends capitalising on the more buoyant market. “We plan to show considerable growth during this period, and there’s the possibility that we may introduce a new model this year,” he reveals.

Shaheer Abrahams, general manager: sales & marketing at Tata Automobile Corporation SA, says 2010 started off badly. “However, improvements could be seen after August. While we noticed growth over that period in all sectors, the increase in volumes in the EHCV market was especially impressive.”

And what of 2011? “We predict that the market will continue to grow, especially in the HCV and EHCV sectors. Tata will perform very well this year, and we will maintain a dedicated focus on customers and customer support,” Abrahams concludes.

Toyota South Africa Motors (TSAM), which will this year celebrate 50 years in South Africa and 31 years as the overall market leader, ended 2010 on a high note, delivering 9 711 new vehicles to customers in December. “We are heartened by the strong sales performance in 2010, especially the second half of the year,” Dr Johan van Zyl, president and CEO of TSAM, tells FOCUS. “Although the market widely expected an increase in vehicle sales prior to the SWC, we did not expect the market to continue at the same pace after July and in some instances even increase the rate of growth.

“At TSAM we set an optimistic target of 20% growth over the 385 186 units sold in 2009. In the end the market bettered our estimation and grew by 24,7%. This can be attributed to several factors, notably a more positive economic climate – with lower interest rates and a more positive sentiment amongst consumers. We also noted that more customers felt comfortable enough to replace ageing models, which was postponed during the turbulent times of 2008 and 2009,” says Van Zyl.

The Toyota CEO says the commercial vehicle market surprised even the most optimistic analyst, given that commercial vehicle sales increased after the SWC. “This points to underlying economic confidence, which we expect to continue, albeit at a slower pace,” says Van Zyl. “Hilux remained the top seller. We expected an optimistic growth of 20% and the market performed even better, so we were very pleased with sales given the tough market in 2009.” In conclusion, Van Zyl says he expects 2011 to again be a positive year, with a growth in new vehicle sales (total market) of between 5 and 8%.

According to Johan Richards, chief executive of UD Trucks Southern Africa, while lower interest rates supported the recovery of the commercial vehicle market in 2010, the typical distribution segments of MCVs and HCVs did not grow as drastically.

“We believe that this trend can possibly be attributed to a somewhat sluggish consumer spend, especially in light of the current high debt-to-income ratio, as well as the high level of unemployment that is still plaguing our economy,” says Richards. “In contrast, the improvements in commodities contributed to the good growth in the EHCV segment.”

Looking forward, Richards expects continued growth and anticipates a total market of between 24 000 to 25 000 units. Richards says that “if one could cast away a cautious and sceptical approach” then there are indeed many positives that can create growth opportunities in 2011. “These include the implementation of the government’s Growth Plan, expected lower inflation rates, improved roads on which to operate, continuous fixed investments, as well as improvements in service delivery, and the financing of vehicles,” he says.

Hermann Viviers, sales consultant at VDL Bus & Coach SA, says the bus market performed better than expected. “We are expecting a 2011 market of 1 200 units, with a shift in emphasis to 6×2 80-seater units,” he predicts. Viviers predicts the luxury market will decline, but significant growth is expected in the export market.

Jaco Steenekamp, division head of Volkswagen Commercial Vehicles, says that the company benefited from the upturn in both the light and medium commercial vehicle markets last year. “We also bolstered sales thanks to the launch of a facelifted T5 Transporter/Kombi/Caravelle range. But the biggest event for us was the launch of the Amarok one-ton pickup in double cab version,” he says.

“The first customers took delivery of their bakkies in November 2010, and have given us great customer satisfaction index (CSI) scores,” Steenekamp says. On an international front, Volkswagen Commercial Vehicles delivered 22 600 units in its launch year – and Volkswagen’s new pickup has already attracted 40 000 binding orders for 2011.

And what of 2011? “We believe the LCV market will grow by 10% while the MCV market will expand by 7%. We intend maintaining our market share with the Caddy, T5 Transporter and Crafter, and will substantially grow our overall market share with the Amarok double cab, and the introduction of the Amarok single cab,” he predicts.

Anders Lindblad, president, Volvo Area Southern Africa, predicted a 10% growth in 2010 with focus on the fast-moving consumer goods (FMCG) sector and mining; this proved to be a pretty accurate forecast. “In 2010 it soon became clear that the economic downturn that had plagued the 2009 business year was being put firmly in the past and local markets responded to greater demand for vehicles in the long-distance transport sector and for mining and aggregate transport, especially the movement of coal,” he comments.

“We are very pleased with our performance in 2010,” says Lindblad. “It was better than expected and Volvo sold more than 1 000 units in the heavy-duty transport sector. The Volvo FH range has proved to be very successful for long distance applications and we have supplied significant orders into some large new fleets. Many loyal long-term customers are running exclusive Volvo operations. Our product offers include transport solutions that follow the full life cycle of a vehicle from finance to fully managed optimised maintenance programmes. This allows our customers to focus on their core business whilst the vehicles deliver profitable bottom line performance,” he adds.

Mark Erasmus, general manager sales and marketing, is very optimistic for 2011. “We have already placed significant orders with our production facilities in Durban for the coming months. About 80% of our sales will head for the long-distance transport sector and the balance will be delivered into construction, mining and local distribution applications.

I see steady and positive growth in 2011.”

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